Loan solves Escondido chamber debt problem

Critics called proposed sale of building to city a bailout

ESCONDIDO  Three weeks after Escondido officials backed away from a proposal to buy the Chamber of Commerce building for $550,000 to help the organization out of debt, chamber officials say they’ve secured a bank loan for the same amount.

Critics had called the proposal a bailout that would have forced taxpayers to clean up the chamber’s financial mess.

But the chamber’s ability to quickly secure a large loan is strong evidence that the city proposal wasn’t a sweetheart deal, Mayor Sam Abed and chamber chief executive Les Abshire said this week.

“It was never a bailout,” Abed said Tuesday. “It would have been a good business decision for the city.”

Chamber officials proposed the deal to cover debts incurred primarily because of a sharp drop in membership during the economic downturn.

Under the proposal, the chamber would have slowly bought the building back from the city over 20 years with monthly rent payments of $3,100.

The payments, which would have included 3 percent interest, would have amounted to $717,000.

The terms of the bank loan are similar, Abshire said.

The chamber receives the same $550,000, and the monthly loan payments will be $2,850 — $250 lower than the rent payments would have been.

However, the city deal would have covered 20 years and the bank loan covers only 10 years, with a large balloon payment due at the end of the 10th year. But Abshire said he was confident the chamber could refinance at that time.

One other difference would have made the city proposal better, Abed said.

“Now the building will be collateral, and the bank will control it instead of the city if the chamber can’t make the payments,” he said.

Under the city deal, city officials would have had control over the building if the chamber defaulted. The building, on Broadway just north of downtown, is strategically near the city’s Park Avenue Community Center.

Abshire said five banks offered to lend the chamber the money it needs to clear up some debts. He declined to name the bank, but said a firm commitment had been made pending an appraisal of the building.

Abshire said that having so many banks interested vindicates the city’s willingness to consider the buy-and-lease-back deal. It also shows that the chamber’s financial problems have been exaggerated, he said.

“The chamber is doing very well financially as evidenced by us getting a loan and having banks compete for it,” Abshire said.

He said chamber officials immediately sought a loan when city officials postponed a decision on the deal April 3. City officials had just received a demand from the state for $6.7 million in redevelopment payback money.

“While no one said straight out that our deal was dead, the writing was on the wall obviously,” Abshire said.

Councilman Olga Diaz, a vocal critic of the city proposal, said this week she was pleased to see the chamber had secured a loan.

“I’m glad to hear the chamber is on its way to recovery,” she said. “A bank loan should have been Plan A all along.”

In related news, City Manager Clay Phillips said last week he plans stop paying the chamber $64,000 a year for marketing and tourism promotion.

Phillips said those duties would be more efficiently handled by the city. The chamber’s tourism director, Katherine Zimmer, would be hired as a city employee.

Phillips said he hadn’t decided whether Zimmer would remain at the chamber office or work at City Hall.

Abshire declined to comment this week, describing Phillips’ plan as a “negotiating point.”

But the mayor said he supports the switch.

“We were satisfied with the function of the visitors bureau under the chamber,” Abed said. “But this will consolidate our efforts and coordinate them better.”